HW-1618 Computer manufacturer produces three types of devices

A computer manufacturer produces three types of devices:mobile phones, tablets, and computers. For the production of these three devices you have the following information:





Phone Tablet Computer

Material cost per unit £90 £140 £315

Direct labor hours per unit 2 2.5 4


Budgeted units



1,500,000



900,000



1,200,000





Labor cost per hour



£8


Overhead costs per annum






Utilities



£20,000,000






Rent



£15,000,000






Audit and legal



£5,000,000






Administrative staff



£40,000,000






Total



£80,000,000







ABC analysis suggested that overhead costs are distributed to the three products according to the table below:




Overheads



Phone



Tablet



Computer


Utilities



£8,000,000



£5,000,000



£7,000,000


Rent



£8,250,000



£2,250,000



£4,500,000


Audit and legal



£2,900,000



£1,250,000



£850,000


Administrative staff



£23,200,000



£6,000,000



£10,800,000



For each of the three products, the company aims at a different percentage for profit. Under the full absorption costing method and the targeted profit percentage, the prices of the three products should be:




Phone



Tablet



Computer


Full costing price



£170.69



£233.87



£435.67




Calculate the aimed profit percentages for the three products and under the full absorption costing method, with overhead costs absorbed on the basis of direct labour hours.

Use the profit percentages that you derived in (1) and calculate the prices of the three products under the ABC system.


Answer will be sent by email as attachment.